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VRL Logistics Shares Jump 20% As Promoters Cancel Airline Plan

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VRL Logistics Shares Jump 20% As Promoters Cancel Airline Plan

VRL Logistics shares had been under severe pressure over regional airline plans


Highlights

  1. VRL Logistics's promoters withdrew their plan to launch regional airline
  2. The decision is seen as a boost for VRL Logistics
  3. Its shares have been under severe pressure since the announcement in May

VRL Logistics shares jumped 20 per cent on Thursday after the Hubli-based company's promoters withdrew their plan to launch a regional airline.

"There have been several developments including the announcement of the new aviation policy by the center. The regional connectivity related aspects listed in the said policy do not augur well with our planned business model envisaged for the proposed activity," said Vijay Sankeshwar, promoter of VRL Logistics, in a statement yesterday.

The decision to not go ahead with a regional airline is seen as a boost for VRL Logistics, whose shares have been under severe pressure since the plan was announced in May. VRL Logistics shares are down over 21 per cent since May 23, when the promoters had first announced the plan to launch a regional airline.

G Chokkalingam of Equinomics told NDTV Profit that it is certainly a positive development and the management has been taught a lesson.

VRL Logistics promoters wanted to incorporate a separate company to start a regional airline. They wanted to sell a minority stake in VRL Logistics to raise Rs 1,400 crore for the airline, according to reports.

With the airline overhang out of the way, investors expect VRL Logistics promoters to focus on the core business, analysts said.

Mr Chokkalingam however advised investors against putting money in VRL Logistics shares. Valuations of many companies in the logistics sector are "super-rich" and hence not sustainable, he added.

VRL Logistics, which came out with its IPO in April 2015, had a spectacular listing last year. Its shares gained over 50 per cent (against issue price of Rs 205) on the day of listing. VRL Logistics made a 52-week high of Rs 479 in September last year.

VRL Logistics shares closed 11.14 per cent higher at Rs 349.30, outperforming the broader Nifty that ended 0.65 per cent lower.



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